Two sides of Pennsylvania Lottery's British suitor

Camelot Group has been criticized in the United Kingdom, even as it boosts sales and revenue.

December 24, 2012|By John L. Micek, Call Harrisburg Bureau

HARRISBURG — — A British company looking to take over the day-to-day operations of the Pennsylvania Lottery has come under fire on its home soil for aggressive business practices. But it has pumped up sales and revenue for the U.K.'s National Lottery, which it has operated since the lottery's creation in 1994.

The Camelot Group, acting through a newly created subsidiary, Camelot Global Services PA LLC, submitted the lone bid to assume management duties at the Pennsylvania Lottery, which funds programs for senior citizens across the state.

Republican Gov. Tom Corbett, who ran for and won election in 2010 in part by promising to privatize some state services, has said he wants to maximize profits from the lottery, a $3.5 billion enterprise. But Corbett, who has said he does not have to seek legislative authorization, has stressed that the state has a legal obligation to retain ownership and control of the agency.

Corbett has pushed to spin off other state services, such as the Pennsylvania Liquor Control Board. And earlier this year, the administration sold the naming rights to an exhibition hall at the Pennsylvania Farm Show complex to central Pennsylvania-based Weis Markets for $750,000.

State officials have until Dec. 31 to decide whether to accept the company's management proposal. But they were reportedly in discussions last week to extend the deadline.

In its bid materials, Camelot has said it would guarantee nearly $34 billion in profits over the life of a potential 30-year management agreement. Since its creation 40 years ago, the lottery has generated $22.6 billion in profits.

Camelot has a consulting agreement with the California Lottery, where it says sales have grown by $400 million since it began working with the state in 2002. Two other states, Illinois and Indiana, also have privately managed lotteries.

According to press accounts in England, Camelot has a record of increasing sales. The company sold tickets costing 2.4 billion pounds through Sept. 19, which equates to $3.87 billion, for an increase of about 3.4 percent from the same six months in 2011.

Similar to the Pennsylvania Lottery's mandate, the company is charged with turning over lottery proceeds to worthy causes, giving a record 953 million pounds, or $1.53 billion, to charities, an increase of 4 percent, The Independent newspaper reported last month.

In addition, the company substantially bankrolled the English presence at the London Olympics and Paralympics, raising 750 million pounds it says went largely to athletes competing in the quadrennial games.

The Camelot Group's transparency came into question in October 2011, when it came under fire for refusing to release information showing how much money spent on National Lottery tickets went to specific areas across England.

Citing 1999 sales data, The Guardian newspaper reported that some regions received four times as much for charity as local residents spent on tickets, while others received less than 1 percent of what area residents spent.

A Camelot spokeswoman told the newspaper that while the company was responsible for generating money for charity, to the tune of about $48.3 million a week, it played no role in where the money was distributed and did not maintain such data.

Camelot also has been locked in a bitter rivalry with an entity known as The Health Lottery, whose proceeds fund charities for dementia and Alzheimer's disease, among other causes, the Daily Mail newspaper reported. Camelot sued in British court to keep the rival lottery from operating.

In press reports, Camelot claimed to be losing millions of pounds to the lottery operated by Richard Desmond. Desmond has made the counter-claim that he has boosted National Lottery sales. Camelot is appealing to Parliament to intervene.

In 2011, the company was accused of targeting children when it rolled out a line of scratch-off cards based on such kiddie board games as Monopoly and Connect 4, The Daily Mail newspaper reported. The cards, which offer instant jackpots of as much as 1 million pounds, are often placed in shops alongside such impulse buys as candy and chewing gum, the newspaper reported.

In England, the minimum age for buying scratch-off cards is 16, and the lottery places the onus on shopkeepers to decide which customers are underage, the newspaper reported.

And in October 2000, billionaire English businessman Richard Branson accused Camelot of "hounding" then-National Lottery Commission chairwoman Helena Shovelton from office. At the time, Branson, the founder of the Virgin family of companies that includes Virgin Mobile and Virgin Airways, was locked in a fight with Camelot to operate the national games.

In Pennsylvania, Democratic lawmakers, organized labor and others have raised questions about the specifics of the bid agreement, and about whether a private manager can wring more money out of the already successful games. They say the state lottery should remain fully in public hands.